Privacy Regulation and Fintech Lending

Abstract

Consumers dislike sharing data with fintechs, but greater access to data can improve loan market outcomes through better screening. We study how the California Consumer Privacy Act (CCPA), which grants users control over and mitigates concerns about sharing their data, affects fintech lending. After the CCPA’s introduction, fintechs’ loan rates decline relative to those of other lenders. In addition, rate dispersion across fintech loans increases, fintechs deny more applications, and they make greater use of nontraditional credit scoring models, whereas their default rates decline by more than those of other lenders. These results are consistent with an improved screening process enabled by additional data. Mortgage originations by fintechs also increase, suggesting that well-designed privacy regulation may enhance financial inclusion. This paper was accepted by Bo Becker, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.02874 .

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